ifo Business Surveys: Further Results
In addition to our overall indices and the regularly published export expectations and employment barometer, we publish further results of the ifo Business Surveys - at the overall, sector or industry level. How do companies assess price developments? Are they worried about their existence? Is there a shortage of orders or materials? Especially in times of crisis, companies' assessments reveal a lot about future developments.
ifo Business Surveys: Further Results
Business Situation in German Retail Deteriorates Slightly
The business situation among German retailers has deteriorated somewhat. The indicator fell from -7.2* points in August to -9.8 points in September. Expectations for the coming months, however, improved a little. “The recent noticeable increases in incomes among many consumers should further strengthen purchasing power, and retailers stand to benefit from this, too,” says ifo expert Patrick Höppner.
Business Climate in Germany’s Chemical Industry Worsens Slightly
The ifo Business Climate in Germany’s chemical industry deteriorated somewhat in September to -19.3 points, down from -16.3 points* in August. While assessments of the business situation remain virtually unchanged, business expectations are now gloomier. “The chemical industry faces a great many challenges,” says industry expert Anna Wolf of the ifo Institute.
Most German Companies Holding On to Office Space Even with Remote Working
Most companies in Germany don’t want to downsize their offices despite allowing employees to work from home. “The overwhelming majority of companies are leaving their office space as is. Only 9.1% of all companies plan to downsize their offices because of remote working. In individual industries, however, the figure is significantly higher – up to 40% in some cases,” says ifo expert Simon Krause. “So working from home is leading to a slight decline in demand for office space, putting pressure on the real estate market.”
Business Climate in the German Automotive Industry Brightens
The business climate in Germany’s automotive industry has improved slightly. In September, the indicator rose to -14.7 points, up from -18.1 points* in August. “German automakers and their suppliers are satisfied with their current situation, but their expectations are still at rock bottom,” says Oliver Falck, Director of the ifo Center for Industrial Organization and New Technologies.
More Companies in Germany Want to Raise Prices
Slightly more companies in Germany are planning to raise their prices. After twelve consecutive declines, price expectations went up again in September from 14.7 points* to 15.8 points. “It will be some time before Germany achieves the European Central Bank’s 2% inflation target,” says Timo Wollmershäuser, Head of Forecasts at ifo. Price expectations rose particularly sharply in hospitality, from 49.1 points* to 62.8 points. Among retailers, however, the balance dropped from 33.6 points* to 31.4 points.
Business Situation in German Retail Deteriorates
Companies in most retail segments in Germany assess their business situation as worse. “Expectations for the coming months also remain cautious. The further cooling of the economy is having an impact on retailers, who have also recently had to cope with weakening consumer demand,” says ifo expert Patrick Höppner.
Number of Short-Time Workers in Germany Drops Despite Slowdown
The number of short-time workers in Germany has fallen despite the economic slowdown. In August, 110,000 people were on short-time work, down from 150,000* in May, according to estimates by the ifo Institute based on the ifo Business Survey and figures from the German Federal Employment Agency. “Germany’s weak economy has had little effect so far. One reason for this may be that the regulations facilitating access to short-time allowances expired at the end of June,” says ifo labor market researcher Sebastian Link. As a share of the workforce, the figure fell from 0.4 to 0.3%.
Wave of Cancellations in German Residential Construction Reaches New High
The crisis in the German residential construction sector continues to intensify. In August, 20.7% of companies reported canceled projects, up from 18.9% in the previous month. This is a finding of surveys by the ifo Institute. “Residential construction cancellations are piling up to a new high. We haven’t seen anything comparable to this since the survey began in 1991. The uncertainty in the market is huge,” says Klaus Wohlrabe, Head of Surveys at ifo.
Material Shortages in German Manufacturing Ease Again
German manufacturing is seeing fewer material shortages. In August, 24.4 percent of the companies surveyed reported shortages, down from 29.5 percent in July. This is a finding from the ifo Institute’s latest survey. “The situation is trending more and more toward pre-crisis levels,” says Klaus Wohlrabe, Head of Surveys at ifo. “Business problems are now shifting from the supply side to the demand side.”
Germans Work 17% of Their Working Hours from Home
Germans work 17% of their working hours from home, finds an ifo Institute survey. “However, barely half of all jobs are even compatible with remote working in the first place,” says ifo expert Jean-Victor Alipour. “Where it’s an option, employees work from home an average of 1.5 days a week.”
Companies in Germany Expect Lower Prices
Inflation in Germany is likely to fall further. German companies’ price expectations for the coming months have declined somewhat, according to the ifo Institute’s Business Survey. They fell to 14.7 points in August, down from 16.3* points in July. “However, the decline in inflation will be a long, hard road,” says Timo Wollmershäuser, Head of Forecasts at ifo. Among retailers, for example, the balance of price expectations fell only from 34.9* to 33.5 points; in hospitality, from 47.8* to 46.6 points; and in the food and beverage trade, from 55.3* to 55.1 points.
Business Climate in Germany’s Automotive Industry Continues to Deteriorate
Germany’s automotive industry views its current business situation as worse than in the previous month, according to the ifo Business Survey. The indicator fell to 12.7 points in August, down from 22.1 points* in July. “Sentiment has deteriorated most noticeably among automakers, while suppliers remain fairly satisfied with their current situation,” says Anita Wölfl, a specialist at the ifo Center for Industrial Organization and New Technologies.
Competitiveness of German Manufacturers of Machinery and Equipment Deteriorates
In the competition for market share, German manufacturers of machinery and equipment find themselves in a worse position, finds an ifo Institute survey. “In sales markets outside the EU, German manufacturers of machinery and equipment are facing fiercer competition, especially from China,” says Nicolas Bunde, an industry expert at the ifo Institute. The survey score for competitiveness fell to -14.3 points, down from -7.3 in April.
New Record Low in Orders for German Residential Construction
The slump in residential construction in Germany continues. In July, 40.3% of companies complained of a lack of orders, up from 34.5% in June. A year ago, the proportion was 10.8%. These findings are from the ifo Institute’s latest survey. “A storm is brewing. Following many years of expansion, now higher interest rates and the drastic rise in construction costs are choking off new business,” says Klaus Wohlrabe, Head of Surveys at ifo.
Germany’s Shortage of Skilled Workers Worsens Slightly
More and more German companies are short of skilled workers, finds the latest ifo Business Survey of around 9,000 companies throughout Germany. According to the survey, 43.1% of firms reported suffering from a shortage of qualified workers in July, up from 42.2% in April 2023. “Despite a sluggish economy, many companies are still desperately searching for suitable employees,” says ifo expert Stefan Sauer. The all-time high of 49.7% was reached in July 2022.
Fewer Supply Bottlenecks in German Retail
In food and beverage retail, many companies remain affected by supply problems: 69.9% of businesses reported this in July, down from 79.7% in June. Among car dealerships, the figure was 53.4%; in June, this figure was 60.9%. In clothing, toy, and furniture retail, only just under 20.0% of businesses were affected.
Material Shortages Continue to Ease in German Manufacturing
German manufacturing is facing fewer and fewer problems with material shortages. In July, 29.5% of the companies surveyed reported shortages, down from 31.9% in June. “The situation has been easing steadily for more than a year,” says Klaus Wohlrabe, Head of Surveys at ifo, “although bottlenecks still exist for some electronic components.”
Business Climate in Germany’s Chemical Industry Brightens Only Marginally
The ifo Business Climate in Germany’s chemical industry has improved only slightly. The indicator climbed from minus 28.1 points in June to minus 25 points, according to the ifo Institute survey. The industry’s assessment of its business situation and expectations remained extremely negative at -26.1 and -23.9 points, respectively. “Although the rapid decline in the chemical industry has stopped for now, there’s no sign of a recovery happening any time soon,” says industry expert Anna Wolf of the ifo Institute.
German Automotive Industry Sees Fewer Orders
German automakers and their suppliers view their current business situation as worse than in the previous month, according to the ifo Business Survey. The indicator fell to 23.6 points in July, down from 27.1 points in June. “Orders are currently slow for automakers and their suppliers,” says Anita Wölfl, a specialist at the ifo Center for Industrial Organization and New Technologies. “In light of persistent uncertainty in the global markets, the automotive industry’s expectations for the coming months also remain at a low level.”
Artificial Intelligence in Use at 13.3% of Companies in Germany
In Germany, 13.3% of companies are currently using artificial intelligence (AI), and 9.2% are planning to use it. A further 36.7% of all companies surveyed are discussing potential use cases. “The majority of all companies in Germany are currently looking into AI,” says industry expert Anna Wolf of the ifo Institute. AI-based systems process large amounts of data using algorithms to make quick decisions via automated data analysis.
Price Expectations of Companies in Germany Marginally Higher
German companies’ price expectations for the coming months have risen marginally, finds the ifo Institute’s survey. They rose to 16.4 points in July, up from 16.3 points in June. “For the first time since October 2022, the share of companies planning to raise their prices has on balance not declined further,” says Timo Wollmershäuser, Head of Forecasts at ifo. A growing majority of the companies surveyed are planning further price increases, especially among retailers (34.8 points, up from after 32.9 points) and consumer-related service providers (32.9 points, up from 32.7 points). “This makes it likely that the decline in domestic inflation in particular will take a little longer,” Wollmershäuser adds.
Cloud Computing in Use at 46.5% of Companies in Germany
Among German companies, 46.5% are currently using cloud computing technology for their business processes, while 11.1% are planning to. A further 18.2% of all companies surveyed are still discussing whether or not to introduce the technology. “Cloud computing has clearly established itself as a key component of modern IT infrastructure at German companies,” says industry expert Anna Wolf of the ifo Institute. In cloud computing, IT resources such as software, storage, and computing power are made available via the internet. Companies use this technology to optimize their business processes.
More Supply Bottlenecks in German Food Retail
The proportion of food retailers in Germany with supply problems has increased. In June, 79.7% reported bottlenecks, up from 65.8% in May. “Retailers are still in difficult negotiations with manufacturers on prices and conditions for certain goods. Supply freezes by manufacturers and the delisting of certain products by retailers are some of the ways the players are exerting pressure,” says ifo expert Patrick Höppner.
Material Shortages Ease in German Manufacturing
German manufacturing is seeing fewer material shortages. In June, 31.9% of the companies surveyed reported shortages, down from 35.3% in May. However, this is still much higher than the long-term average of 15.2%. “Unfortunately, the easing does little to counteract the darkening mood in manufacturing,” says Klaus Wohlrabe, Head of Surveys at ifo. “Companies can process their existing orders faster, but they are currently receiving too few new ones.”
Situation Much Better for German Automakers
The current business situation for German automotive manufacturers has improved significantly. In June, the indicator climbed to 37.5 points, up from 28.4 points* in May. Expectations, however, fell to -56.9 points, down from -10.3 points* in May. “Automakers are experiencing great uncertainty, comparable to the early days of the war in Ukraine or to when the risk of gas rationing in manufacturing shot up last fall,” says Oliver Falck, Director of the ifo Center for Industrial Organization and New Technologies.
